Outsourcing contracts worth $7 billion are coming up for renewal in the UK this year, says Compass Group executive consultant Simon Scarrott.
If SA plans to benefit from this, it should not rely on language skills or time zone similarity to differentiate it from competitors in places such as India, he notes.
Scarrott told ITWeb's 2007 IT Confidence conference this week that he recently heard the SA High Commissioner in the UK cite these and low personnel costs as differentiators in the scramble to become the UK's preferred call centre destination. "None of these are a competitive advantage. Anyone relying on that is setting themselves up for failure," he said.
Scarrott commented that India is suffering on all three fronts, with language skills not being up to par and low productivity, while staff costs are climbing at a compound rate of 15% per year, and attrition is high.
As a result, Indian companies are moving into Eastern Europe, principally the Czech Republic, to take advantage of the time zone, Czech language skills and relatively higher productivity per worker, he stated.
If SA wants to beat the Indians in this game, it will have to show UK outsourcers "a clear demonstrable value proposition". He adds: "Where most vendors have missed the trick, is demonstrating value." They should also forge links with the advisors who support decision-making at the outsourcers in order to get the inside edge, Scarrott added.
Next wave
The UK consultant also cautioned the country from banking on "the last wave". If SA wants to compete, it will do better to align skills and education programmes to the next wave, he noted.
Consumer pressure in the UK has forced the repatriation of many call centres and several companies there now use the promise of customers speaking to somebody at their local branch as a peer differentiator, he said. The next wave will come out of the back-office, where legal services outsourcing, for example, will grow from a current $61 million to $605 million by 2010.
Scarrott advised this should include bringing education levels up to competitive levels, opening up new markets by increasing the breadth of language skills - most Czechs can speak English, French and German, while many older people can speak Russian as well. By contrast, the only European language most South Africans can speak is English. High productivity is another competitive advantage SA should culture. Process maturity and a managed, protected, cost base don't hurt either, he added.
There is some risk as well, Scarrott said. Satisfaction is poor among many of the traditional players, often because they are ill-equipped to manage their outsourcing contracts.
"For every one bad vendor, there are 10 poor buyers. Vendors are often hit by bad press, much of it underserved." Key therefore, is managing relationships, and focusing on the long term.
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